About 2 weeks ago, I mentioned that the Shanghai Stock market was likely to correct.
Well today is the 3rd straight day that the Shagnhai market has traded down. So far its down 20% from its peak but its still up 28% for the year.
The Chinese government thought that the markets were getting ahead of themselves and had implemented a large tax hike to help cool down the “irrational exuberance”. Seems like they got what they wanted and should be quite pleased.
When the markets dropped 8.8% on 27th February, it triggered a drop in global markets. This time though, its all alone.
Apparently, 1000 out of the 1,400 class-A stocks dropped the daily maximum allowed 10%! If they didn’t have controls in place to limit the drop, they might have dropped a lot more. Because of this, I think the market might continue to drop for a few more days.
China economy is unlikely to suffer because of this market correction because its dependent on exports and not financial markets.
Hopefully it’ll create some good investment opportunities!